Tomorrow, the financial services giant will announce that it has made an investment in Stripe.

Founded by brothers Patrick and John Collison, Stripe helps businesses accept nearly all forms of digital payments online. Its service has gained considerable traction and helped push the company into the top tier of startups known as unicorns that are valued at $1 billion or more.

With the latest funding with Visa V, Stripe is valued at $5 billion, up from $3.5 billion just seven months earlier, according to Collison. The amount of investment, which will be used to expand internationally and for hiring, was undisclosed.

Stripe has taken in over $300 million in funding from Sequoia Capital, AmEx, and General Catalyst among others. Both Sequoia and American Express added to their investments in the latest round while Kleiner Perkins put in money for the first time.

"I think the valuation jumped because of the surprising momentum of the business," explained Patrick Collison, who is the CEO of the company. "Right now, we are ahead of our 2015 projections of revenue, and transaction volume from merchants."

Increasingly, Stripe has partnered with large companies to help process their payments. In early July, Stripe announced a deal with American Express to let merchants accept payments on their sites through the credit card company’s new PayPal PYPL rival. Last year, Stripe inked a deal with Ant Financial’s Alipay, China's largest digital wallet, so that online retailers can accept payments from shoppers in China.

Additionally, Apple AAPL listed Stripe as a preferred partner on its payments service, Apple Pay. Stripe also powers payments made through Buy buttons for Pinterest, Facebook and Twitter.

"Partly through design and partly through circumstance, Stripe has a spectacular market opportunity at its doorstep," Moritz said in an interview with Fortune. "Stripe is at the triple intersection of mobile payments, cross border commerce, outsourcing payments for medium and large companies."

The next frontier for Stripe is more international expansion, and part of the Visa deal will be helping Stripe process payments in countries outside the U.S. Currently Stripe is available in 20 countries, but will be expanding more deeply in Asia in the coming months.

Collison says that the two companies will also work on improving credit card security online and making it easier for shoppers to use credit cards when online.

Jim McCarthy, Visa’s executive vice president of strategic partnerships and innovation, explains that the Stripe partnership is similar in many ways to the investment Visa made in payments company Square in 2011. For Visa, Stripe’s popularity with developers and ease of use was particularly interesting, he added.

As it looks to justify its valuation, Stripe will be evaluated in part by the large merchants it can convince to use its technology to process payments. Kickstarter, Shopify and Lyft all currently use Stripe, but the company has yet to woo a brick and mortar retailing giant like Walmart.

Currently, one of Stripe's largest competitors is PayPal, whose Braintree arm processes payments for companies like Uber and food delivery startup Munchery. Last year, Braintree processed $22.8 billion in payments for customers, which more than doubled from 2013. While Stripe doesn't release the amount of payments it processes, sources familiar with the matter said that it's in a similar range as Braintree but growing faster.

Moritz, one of the early investors in PayPal, believes Stripe has more analogies to Amazon Web Services, Amazon's AMZN multi-billion dollar cloud computing business that powers computing for business customers, than it does to PayPal. "Similar to AWS, Stripe relieves a massive burden for companies with payments, allowing a customer to focus on their core business and, trust Stripe to do spectacular job on their behalf."

"The opportunity and the challenge for Stripe will be to be the first truly global Internet company," Moritz said.

]]>http://fortune.com/2015/07/28/stripe-visa/feed/0131118145134-mob09-collison-brothersleenakraoMasterCard exec: Why the move to chip-cards is so importanthttp://fortune.com/2015/07/22/mastercard-security-chip-pin-emv/
http://fortune.com/2015/07/22/mastercard-security-chip-pin-emv/#commentsWed, 22 Jul 2015 15:06:42 +0000http://fortune.com/?p=1215542]]>You may not have even noticed, but if you were sent a new credit card this year, it likely came with a small, shiny chip on the front. That may not be the most thrilling or sexy news, but the chip means security, and according to a survey of MasterCard customers, 77% fear their financial information being stolen or compromised via payment fraud--more than the portion that fears an e-mail hack or even a robbery of their home.

It can often be a pain in the neck to receive a new credit card--you must cut up your old one, call a hotline to activate the new one, then change the number at all the web sites where you have stored auto-pay. But payment-processing giants like MasterCard and Visa insist that you and your financial data will be safer once you move to credit cards that contain a chip. And like it or not, that move is happening at last.

Credit-card issuers are sending customers new cards this year in an aggressive play to get everyone on the more secure “chip and pin” cards that other countries have had for years. Of the 1.2 billion credit and debit cards in circulation in the U.S., some 70% will have chips by the end of 2015.

Payment processors have told U.S. merchants to update their point-of-sale hardware to get ready; come October 1, fraud liability will shift from the issuing bank to the merchant. That is, when a fraudulent transaction happens at a merchant that hasn’t upgraded to the chip-capable terminal, that merchant takes the hit. (And merchants are none too pleased about this.)

Carolyn Balfany, a 28-year veteran of MasterCard, is the company’s SVP of U.S. product delivery for EMV, a lengthy way of saying that she’s quarterbacking the effort to bring these chip cards to MasterCard’s American cardholders. (What is EMV, anyway? It stands for Europay, MasterCard, and Visa, and is shorthand for the standard of chip-cards working with point-of-sale devices.) Balfany stopped by the Fortune offices to explain the particulars of The Great Chip Migration and what it means for security concerns. What follows is an edited transcript.

Fortune: What’s so much better about a card with a chip?

Carolyn Balfany: It’s like having a little micro-computer on your card. What chip can do, besides better security, is decision a transaction on the spot. You can have data--like parameters, balance tracking--on the chip, so the chip and the terminal can resolve a transaction right there and not depend on the telecommunications. A mag-stripe is just static data, whereas a chip is creating dynamic data with a key generated every time you make a transaction. [In layperson’s terms: the chip more reliably confirms to the bank that the person using your credit card is you, and that the transaction is legit.]

Why has it taken the U.S. so long to make the change to chip cards when Europe has had them for years already?

Other markets had more significant fraud faster, and they didn’t have the telecom infrastructure that we had. So in other countries, a lot of times, transactions were being decisioned without the real-time communication our network could do so well. What happened, though, is that as the rest of the world went to chip, the fraudsters came here. If you’re a fraudster, what are you going to attack? The lower-resistant, magnetic-stripe market.

What has also happened is the rest of the world operates on chip, so if the U.S. consumer goes abroad with their mag-stripe card, they get funny looks from a merchant and sometimes even get turned away, the clerk suspects fraud. On the reverse, you’ve got international consumers coming to the U.S. that have chip cards, and their issuers are used to getting more sophisticated transactions, and all of a sudden they’re seeing a mag-stripe transaction, and they suspect fraud. So what happens is more transactions get declined. It’s not good for the consumer, it’s not good for the issuer, and it’s not good for the merchant, because they want to make the sale. So bringing everyone to par is really important.

Isn’t it also true that Europe is known for being faster to adopt new technologies of this sort, or is that because it had the fraud first?

Right, I think that was fraud-driven.

Now the U.S. is playing catch-up.

We’re playing catch-up and we’re going to leap ahead. This is the same underlying chip technology that will be leveraged in mobile solutions. So, in ApplePay, which is the most visible right now, we’ve got tokenization, but we’ve also got an EMV-level transaction happening. It’s the same dynamic data-generation. Now you can see the pendulum swinging the other way, where others are going to follow us. For example, ApplePay rolled here first. And there will be other mobile solutions that will role here first, I’d argue.

But there are still technologies that launch elsewhere first, right, like contactless payments at NFC [near-field communication] terminals.

Yes, Canada and Australia adopted contactless faster. Now in the U.S., as we update the terminals to get ready for chip, we’re going to end up with contactless NFC alongside contact.

Why don’t we just go right to contactless instead of worrying about the chip?

Well, it has to be both. But you could envision everyone using cards that can do both contactless and chip.

The ultimate would be no card at all, right? Where I just use my phone for everything.

But is every demographic, is every person, ready for that? When we think about acceptance, we wouldn’t ever want to take a step back on acceptance. We want to make sure we are adding acceptance constantly to further our war on cash. Now, what we might do is talk about retiring the magnetic stripe. Issuers are already initiating conversations about when they can retire the stripe. For now, we want every merchant to upgrade their terminal because we know that in markets with chip, counterfeit fraud goes down more than 80%. We think that about half of all terminals will be turned on to take chip transactions by the end of this year.

It’s not like chip transaction is any faster from the customer’s perspective, right? You insert the card and hold it in for a second, rather than swipe it; if anything, it feels slower to me.

No, it’s not faster. Some consumers have the perception that chip transactions are much longer, but what we find is that whether you swipe or hold your card there for a second, either way you put your card back in your pocket almost immediately. Most people don’t notice the difference.

So it does take longer, you’re saying, to pay with a chip card? That’s pretty ironic.

Well, yes, but we’re talking milliseconds.

]]>http://fortune.com/2015/07/22/mastercard-security-chip-pin-emv/feed/0FRANCE-FIC2015-CYBERSECURITYDBRMeet AmEx’s PayPal competitor, Express Checkouthttp://fortune.com/2015/07/09/american-express-checkout/
http://fortune.com/2015/07/09/american-express-checkout/#commentsThu, 09 Jul 2015 13:00:39 +0000http://fortune.com/?p=1203273]]>As the war to own the digital wallet continues, American Express is joining the battle with Express Checkout, a new way to pay using your AmEx card online.

AmEx Express Checkout is similar to the way PayPal works. If you see an AmEx checkout button when paying for an item with an online merchant, you login using your AmEx online credentials, choose the AmEx card you want to pay with, and the transaction is complete. AmEx will autofill all the shipping and billing information as well. And the card member's account information is transferred to the merchant securely, says AmEx.

As a security protection, each time card members click on the AmEx Express Checkout button on a merchant site, they will be required to login.

At launch, AmEx has partnered with a number of high-profile online merchants including Burberry, Tory Burch, The Wall Street Journal, Ticketmaster, Avis Car Rental, Cole Haan, Warby Parker, and 1-800-FLOWERS.COM.

Merchants who use Stripe, a technology that lets businesses accept online payments, will also be able to integrate AmEx Express Checkout using Stripe's existing technology.

AmEx checkout aims squarely at PayPal’s own merchant offerings, which has long offered consumers a way to sign and pay for items online using their PayPal account. Similar to AmEx Checkout, PayPal allows people to store multiple credit and debit cards in one account and send money from these different credit card accounts to merchants or people. Of course, with AmEx Checkout, the wallet is a bit more sparse as you can only use the financial services company’s credit cards, whereas with PayPal you can use Mastercard or Visa cards. Visa and Mastercard have their own merchant checkout options as well.

The other competitor is the merchants themselves, who store credit card info in customer accounts for repeat use. But AmEx says that the majority of consumers don't actually create separate accounts with each merchant, and merchants face problems like shopping card abandonment when it comes to the complexity of entering credit card details at checkout.

AmEx also says that the majority of card holders have online accounts and pay their bills online, so most shoppers who want to pay with their cards will have a login.

Granted, for the industry in general lately, growth has been harder to come by. On average sales at the big banks in the Fortune 500 fell nearly 2% last year. Increased regulation since the financial markets tanked has reduced the big Wall Street banks’ trading businesses and revenue. Banks that are focused on lending are doing better, but not by much. Lending to corporations is up, but consumer lending is still down following the mortgage bust, and low interest rates have reduced loan revenue. Now that rates are starting to rise that should boost profits, but it will also lower consumers’ and businesses desire to refinance existing loans.

Nonetheless, a number of large banks have been able to find a way to grow. There are a number of ways to measure the big banks (many people look at assets). But since we recently published the Fortune 500, we decided to look at which of the biggest banks have increased their revenue the most in the past year. (To see which Fortune 500 companies were the biggest revenue growers in 2014, go to our new, searchable list and sort by “Rev Change.”)

1. Bank of New York Mellon

Photograph by Mario Tama--Getty Images

Fortune 500 rank: 189

2014 revenue: $16.4 billion

Year-over-year revenue growth: 4.4%

Revenue at Bank of New York Mellon [fortune-stock symbol="BK"] rose the most of any of the largest banks in the country. But sales were still only up 4.4%, which says something about the current state of big banking.

Unlike many of its rivals, BNY is focused on asset management and investor services, rather than lending or investment banking. That's helped out at a time when the market has been going up.

But the relatively good performance in recent years has stopped the bank from being targeted by two different shareholder activists. Shortly after putting a representative from hedge fund Trian Fund Management, which is led by Nelson Peltz, on its board, the company came under attack from Marcato Capital. The hedge fund says BNY's costs are way too high, calling on the company to cut thousands of employees.

CEO Gerald Hassell agrees costs should come down, but has resisted layoffs. The bank recently sold its 1 Wall Street headquarters, with its ornate Art Deco lobby for nearly $600 million. At least for now, those cuts seem to have made a difference. BNY's bottom line was up 21% last year.

2. State Street

Photograph by Michael Fein -- Getty Images

Fortune 500 rank: 278

2014 revenue: $10.7 billion

Year-over-year revenue growth: 3.8%

Strength in trading services has given a boost to State Street. That's benefitted the Boston-based bank at a time of a broad resurgence in the market. State Street [fortune-stock symbol="STT"] also benefited last year from the general trend in investors' appetites away from active investment management and toward passive exchange traded funds. State Street's ETFs took in $22 billion last year. This year, though, State Street has struggled in the ETF due to increased competition.

And the company hit another big milestone in 2014. It passed rivals Bank of New York Mellon and Northern Trust as the nation's largest custody bank, with just over $28 trillion in assets. In all, sales rose nearly 4% to $10.7 billion.

State Street, though, has come under scrutiny from regulators, and that's hurt its bottom line. The bank has been told to improve its internal controls, and to beef up its programs to combat money laundering. The bank has been setting aside money for expected fines. In April, State Street added $150 million to its legal reserves to resolve outstanding claims against the bank related to foreign exchange activities. Overall, earnings fell nearly 5% last year, but that was mostly because of the legal fees. Operating earnings for the bank jumped nearly 20%.

3. American Express

Photograph by Andrew Harrer -- Getty Images

Fortune 500 rank: 88

2014 revenue: $36 billion

Year-over-year revenue growth: 3.1%

The former king of charge cards has run into trouble recently. But that didn't stop American Express [fortune-stock symbol="AXP"] from ringing up a good 2014. Sales rose as business activity improved. AmEx's largest business is still processing payments in its corporate charge card business. In all, revenue rose just over 3% in 2014 to nearly $36 billion.

Still, that jump was well below the company's stated goal of about 8%. AmEx's consumer business has struggled, at a time when rivals Visa and Mastercard have both done quite well. Costco announced it would end its exclusive relationship with AmEx in 2016, and the company has come under pressure for its higher fees. Also, AmEx's rewards program, which used to be unique, is now pretty close to the norm in the credit-card business, so the company no longer stands out.

CEO Ken Chenault is trying to replace the soon-to-be-lost Costco users and expand the company beyond its traditionally affluent and corporate customer base. AmEx has been offering prepaid debt cards, which often appeal to people who don't have access to a traditional bank account. AmEx is also striking up relationships with McDonald's and Wal-mart in order to grab a bigger share of consumers' everyday spending.

4. Morgan Stanley

Courtesy of Morgan Stanley

Fortune 500 rank: 82

2014 revenue: $38 billion

Year-over-year revenue growth: 3.0%

Morgan Stanley CEO James Gorman has won plaudits for shifting the bank away from Wall Street's riskiest businesses. That's paid off at a time when regulators have cracked down on the trading businesses of big banks, and when the market has come roaring back.

Lending grew by more than 6% last year, to $70 billion in loans outstanding at the end of 2014. On top of its traditional credit card business, Discover [fortune-stock symbol="DFS"] has recently expanded into the business of offering student loans and mortgages. In all, that pushed up sales nearly 3% in 2014 to $9.6 billion.

But the company has also spent money to improve its rewards program. It has also had to spend money to beef up its money laundering controls, which have been called deficient by the Federal Reserve. That's hurt profits, which fell 6% last year.

6. U.S. Bancorp

Photograph by George Frey -- Getty Images

Fortune 500 rank: 138

2014 revenue: $21.4 billion

Year-over-year revenue growth: 1.6%

Staying away from Wall Street has benefitted U.S. Bancorp.

The nation's fifth largest bank by assets hasn't been hit by many of the new regulations that have crack down on trading and other risky financial activities . That hasn't made the bank immune from the crunch of low interest rates, which have crimped lending profits. As a result, revenue at U.S. Bancorp [fortune-stock symbol="USB"] while up in 2015, rose just 1.6%.

7. SunTrust Banks

Photograph by Andrew Harrer -- Getty Images

Fortune 500 rank: 327

2014 revenue: $8.7 billion

Year-over-year revenue growth: 1.2%

Lower interest rates have also pinched revenue SunTrust Banks. But SunTrust [fortune-stock symbol="STI"] still benefited from a rising demand for borrowing. It has also done better than some banks in replacing its lost interest revenue by generating additional fees. Nearly a decade and a half ago it bought investment bank Robinson-Humphrey. That's given it a much large investment banking operation compared to its regional- bank rivals. In all, SunTrust revenues were up a slight 1.2% in 2014, to $8.7 billion.

Last year, the bank had to pay nearly $1 billion to resolve a federal probe of its mortgage practices before and after the financial crisis.

8. Wells Fargo

Courtesy of Wells Fargo

Fortune 500 rank: 30

2014 revenue: $88.4 billion

Year-over-year revenue growth: 0.3%

Of the big banks, Wells Fargo is the most focused on Main Street. And that has been a boon lately. Increased regulation since the financial crisis has made investment banking less profitable, and a drag on other banks. Wells Fargo's lending-focused operations in recent years have been consistently more profitable, and more reliable, than nearly all of its rivals.

Following the financial crisis, when many of its rivals were in serious trouble, Wells Fargo [fortune-stock symbol="WFC"] made a effort to snap up market share in the mortgage market while others were in retreat. The move paid off. Wells quickly rose to become the largest mortgage lender in the land, with nearly a third of the U.S. market at its height.

Recently, though, rates have started to edge up. That's hurt Wells, which was the biggest beneficiary of the mortgage refi boom that followed the financial crisis. In all, Wells' revenue was up just 0.3% in 2014--though profits, at $23 billion, were up 5.4% over the previous year.

]]>http://fortune.com/2015/06/16/fortune-500-fastest-growing-banks/feed/0Wells FargostephengandelfortuneThis company is hosting the first ever eSports event at Madison Square Gardenhttp://fortune.com/2015/06/09/riot-games-esports/
http://fortune.com/2015/06/09/riot-games-esports/#commentsTue, 09 Jun 2015 12:00:09 +0000http://fortune.com/?p=1163663]]>Riot Games had no idea if people would want to watch gamers play video games when the company hosted its first championship tournament in Jonkoping, Sweden in 2011.

But it’s a gamble that paid off for the game development company. Hundreds of thousands of people tuned in online to watch that first tournament, and today the most popular eSports game in the world is Riot Games' League of Legends, which has over 85 million players and attracts hundreds of millions of viewers.

And the eSports business continues to grow. By the end of 2015, video game research firm Newzoo forecasts there will be 113 million global eSports enthusiasts and an additional 147 million fans watching occasionally--comparable to traditional sports viewers who only tune in for a national or world championship.

Once Riot Games realized there was a global interest in competition, it established the League of Legends Championship Series (LCS), which is currently in its fifth season. The 2014 world championship tournament, which spanned competitions from Taipei, Taiwan, to Seoul, Korea, generated 288 million cumulative daily unique impressions. The world championship finals attracted 27 million viewers, who tuned in for an average of online view time of 67 minutes.

Just like real sports, LCS has hosted competitions in major sports venues such as the Staples Center for the 2013 finals and the Seoul World Cup Stadium in 2014. This August, League of Legends will be the first video game ever played inside Madison Square Garden in New York for the North American LCS Summer Finals. This fall, gamers will compete at Wembley Arena in London for quarterfinals, and at Brussels Expo for semifinals before the 2015 finals at Mercedes-Benz Arena in Berlin.

"There's a lot of criteria that goes into choosing locations for big events," says Dustin Beck, vice president of eSports at Riot Games. "It's always tough finding venues because we produce technologically complex shows and we're limited by infrastructure that's available. We try to spread around the love for a lot of our major markets. In the coming years, hopefully we can get to more locations."

According to Beck, Riot cherry-picked elements from a variety of real sports from European soccer to the NFL and NBA to the Olympics to create LCS. League of Legends has its own minor league system, an All-Star Game, and an annual North American Collegiate Championship, which offers $100,000 in scholarships. The company also hired stage, broadcast, and events experts who also are gamers from around the world to ensure that all of the drama of the season, as well as the personal stories of the players and teams, are brought to life for fans, similar to any major sport.

Despite attracting big mainstream sponsors like Coca-Cola and American Express, Beck says Riot Games does not make money from LCS. Instead, the company invests in eSports just as it does in creating new champions for the free-to-play game. Whether its investment in eSports ever does generate profits is immaterial according to Beck, who says the company wants to focus on eSports because it's what fans want.

But thanks to Chinese Internet company Tencent Holdings buying a majority stake of Riot Games in Feb. 2011 for a reported $400 million, Riot Games can fine-tune its LCS experience without worrying about costs. League of Legends generated over $1.3 billion in 2014 in revenue through in-game micro transactions, according to SuperData Research CEO Joost van Dreunen.

]]>http://fortune.com/2015/06/09/riot-games-esports/feed/0League of Legends Mid Season InvitationaljohngaudiosiWhy American Express needs to up its rewards gamehttp://fortune.com/2015/06/04/american-express-rewards/
http://fortune.com/2015/06/04/american-express-rewards/#commentsThu, 04 Jun 2015 16:52:59 +0000http://fortune.com/?p=1159812]]>American Express has been coasting on its reputation, but it’s time it beefed-up its credit card rewards to keep pace with rivals like Visa and MasterCard, according to Nomura Holdings analysts.

AmEx AXP has long been synonymous with top perks and good customer service. In recent years, however, other companies have come along with higher-reward cards and left AmEx in the dust, the report said.

Currently, Visa V and MasterCard MA issuers JPMorgan Chase JPM and Capital One COF have the best cards for the rewards, Nomura said. The report, covered by Bloomberg, says it is only a matter of time before savvy consumers catch on, especially in the Internet era where people can “gain increased visibility into the value of their rewards and are intolerant of subpar economics.”

AmEx, which recently ended its partnerships with Costco and JetBlue, increased its rewards spending 7.3% to $6.93 billion last year. It also announced expanded perks for its Starwood Hotels & Resorts partnership, as well as more reward benefits for its premier gold cards.

However, that may not be enough when new high-value cards like Citi Double Cash and Discover it Miles are hitting the U.S. market with reward values that are 25% to 80% higher than the previous average.

For more about American Express, watch this Fortune video:

]]>http://fortune.com/2015/06/04/american-express-rewards/feed/0Visa MasterCard American Express 2013lorenzettifortuneAmerican Express president Ed Gilligan passes awayhttp://fortune.com/2015/05/29/american-express-president-ed-gilligan-passes-away/
http://fortune.com/2015/05/29/american-express-president-ed-gilligan-passes-away/#commentsFri, 29 May 2015 18:48:56 +0000http://fortune.com/?p=1143475]]>American Express president and vice chairman Ed Gilligan passed away unexpectedly this morning, according to a public letter from company chairman and CEO Ken Chenault.

The letter reads, in part:

With the heaviest of hearts, I must share some devastating news. Ed Gilligan - President of our company and friend and inspiration to many inside and outside American Express - became seriously ill on a flight home to New York this morning and has passed away.

This is deeply painful and frankly unimaginable for all of us who had the great fortune to work with Ed, and benefit from his insights, leadership and enthusiasm. Our thoughts and prayers go out to his wife, Lisa, and their four children - Katie, Meaghan, Kevin and Shane. He was a proud husband and father, and his love for his family was evident in all that he did.

Gilligan joined American Express AXP 35 years ago as an intern, working his way up the ranks. He was named president in 2013.

]]>http://fortune.com/2015/05/29/american-express-president-ed-gilligan-passes-away/feed/0Edward "Ed" Gilligan 2014 croppeddanielprimackJawbone hopes to change subject with new fitness trackers, payment partnerhttp://fortune.com/2015/04/16/jawbone-up-payments/
http://fortune.com/2015/04/16/jawbone-up-payments/#commentsThu, 16 Apr 2015 04:01:45 +0000http://fortune.com/?p=1081217]]>Jawbone, the fitness band maker that’s faced a series of troubles in the last several months, is trying to reverse its bad luck with a battery of new products.

The company, whose watch-like devices track the distance run by people who wear it and tracks sleep patterns, unveiled two new devices on Thursday, the UP2 and UP4. It also confirmed a previously rumored partnership with American Express that lets people use their Jawbone band to pay at store checkout counters.

Jawbone’s new products come as the company, a one-time high-flyer, tries to regain momentum after a series of missteps over the past few months. The uncertainty cast a dark cloud over the company, a pioneer in the emerging market of wearable devices that was founded 16 years ago.

In January, Fortunereported that contract manufacturer Flextronics had filed a breach of contract lawsuit in August, claiming that "Jawbone has materially (and repeatedly) breached the terms of a clear and unambiguous contract ... to the extent of over $20 million in goods received but not paid for." The two companies quickly settled the lawsuit.

Jawbone also suffered a black eye because of a delay in the availability of a previously announced device, the UP3. Although introduced in October, it suffered serious delays and will only start shipping on Monday to customers who pre-ordered it. The band, the only one from the company with a heart rate sensor, was originally marketed as being water-resistant. However, the company has had to acknowledge that it, in fact, isn’t.

Meanwhile, Jawbone is facing increasingly stiff competition, not only from direct competitors like FitBit, but also from smartphone makers like Samsung and Motorola that have started to introduce smartwatches with similar fitness tracking capabilities. Apple also entered the market with its own smartwatch, which will start to ship later this month.

The UP2

The UP2 is Jawbone’s new entry-level device, retailing for $99, and replacing its predecessor, the UP24. It tracks physical activity and sleeping patterns.

Jawbone is hoping that its more compact size (it has 45% less volume than the UP24) will entice people to wear it all the time, including at night. And wearing it all day is, according to Jawbone, the best way to make use of the company’s data tracking software, Smart Coach. The software connects a user’s phone to their device and provides information like steps taken, sleep patterns, and the ability to adjust settings.

The UP2’s design is similar to its predecessors with its subtly textured and sleek plastic band. But Travis Bogard, vice president of product management and strategy for Jawbone, hinted that more design options are likely for the UP in the future. The UP2 is now available for order online, and will hit the shelves at Best Buy stores this weekend.

The UP4 and American Express

On Wednesday, media outlets reported that Jawbone had partnered with credit card company American Express to turn its fitness bands into digital wallets. The idea takes an obvious aim at Apple Pay, Apple’s cardless payment system that works with its own iOS devices and the upcoming Watch.

The device, which will retail for $199, has features that are identical to the UP3, including its design and sensors. The difference is that it also comes with an NFC chip, short for near-field communications, on the side of the band. American Express card holders can connect their accounts via the UP smartphone app, and use their device to pay while shopping by simply tapping the device in front of any NFC-enabled card reader at participating American Express merchants.

"It's like using your AmEx card," Leslie Berland, executive vice president of digital partnership for American Express, told Fortune.

Apple has a big head start with Pay, which it introduced in September last year. Pay also relies on similar NFC technology.

A year ago, a small press event, Berland said that she found most digital payment products, especially digital wallets, to be clunky. So it’s no surprise that this partnership uses both technology that’s widely available -- NFC -- and doesn’t require users to carry their phones as long as they can tap their UP4-wearing wrists on a card reader.

For a look at the Apple Watch, watch this Fortune video:

]]>http://fortune.com/2015/04/16/jawbone-up-payments/feed/0UP2 & UP3 Group Shot_01.R1.6_RGB copykiakokalitchevaAmEx is bringing mobile payments to fitness trackershttp://fortune.com/2015/04/15/american-express-fitness-trackers/
http://fortune.com/2015/04/15/american-express-fitness-trackers/#commentsWed, 15 Apr 2015 15:36:55 +0000http://fortune.com/?p=1080079]]>The new Apple Watch won’t be the only way you can make payments on your wrist. American Express is looking to bring mobile payments systems to wearable health trackers, Engadget reports.

The credit card company is working with Jawbone to bring a mobile payments service to a yet-t0-be announced fitness band, allowing wearers of the device to use it to make payments at checkout counters. Such a move would make sense for American Express -- if a workout fanatic leaves their wallet at home on a run, they could still use their AmEx card through their wearable device to score a snack or some water.

Mobile payments is an increasingly important service for hardware creators, with Google, Apple and others trying to win users in the lucrative arena. Mobile payments are good for banks and credit card companies because they make people shop more -- it’s expected that the growth of mobile payments could lead to spending increases of between 12% and 18%, according to CNBC.

Google had a mobile payments app, Google Wallet, long before Apple got in the game. But the competition really heated up when Apple introduced Apple Pay with the iPhone 6, iPhone 6 Plus and, soon, the Apple Watch.

]]>http://fortune.com/2015/04/15/american-express-fitness-trackers/feed/0American Express Co. Credit Cards 2013bgfortuneVisa wins Costco’s credit card businesshttp://fortune.com/2015/03/02/costco-visa-american-express/
http://fortune.com/2015/03/02/costco-visa-american-express/#commentsMon, 02 Mar 2015 13:45:41 +0000http://fortune.com/?p=1011533]]>Costco announced that the retailer’s credit card network will be handled by Visa next year, an announcement that comes weeks after it sideswiped Visa rival American Express in a move that ended a 16-year relationship with the retailer.

The retailer, 19th on the Fortune 500, said Citigroup C would be the exclusive issuer of Costco’s co-branded credit cards while Visa Vwill be replacing American Express AXP as the credit card network for Costco in the U.S. and Puerto Rico beginning April 1, 2016. Costco, known for issuing sparsely worded press releases, provided few details about the deal with Visa.

The Costco business is a big coup for Visa, as Costco is one of the nation’s largest retailers. Shares of American Express dropped last month after the credit card company announced that its exclusivity deal with the wholesale club retailer was set to expire at the end of March in 2016. As WSJ reported previously, the agreement had driven a big chunk of business for American Express. But when the arrangement ends, millions of customers will be forced to use a different credit card when shopping at Costco.

Losing Costco’s business will dent results at American Express, as that business generated about 8% of the company’s worldwide billed business in 2014. Over 70% of the spending on those accounts occurred outside a Costco warehouse, so business was widely spread. American Express said it did try to win the business, but ultimately it was “unable to agree to terms that would have provided attractive returns for our company and our shareholders.” American Express warned it could book a restructuring charge and potentially cut costs if it isn’t able to generate enough business from other products to offset the lost business associated with the Costco co-branded portfolio.

]]>http://fortune.com/2015/03/02/costco-visa-american-express/feed/0US-HEALTH-COSTCO-BERRIESjohnnerkellWhy your credit card rates could be going up soonhttp://fortune.com/2015/02/25/american-express-rates/
http://fortune.com/2015/02/25/american-express-rates/#commentsWed, 25 Feb 2015 16:27:20 +0000http://fortune.com/?p=1005670]]>If you’ve got an American Express card, you may see an uptick on your bill pretty soon.

The credit card company is raising rates on more than 1 million cards, Bloomberg reports. Annual rates for some customers will climb by an average of 2.5 percentage points, for a total of at 12.99% at the lowest.

Bloomberg notes that American Express sent letters to the customers affected explaining that the changes were made because the company discovered that rates for its cards were below that of its competitors.

This is American Express’ first rate bump in more than five years.

]]>http://fortune.com/2015/02/25/american-express-rates/feed/0American Express Co. Credit Cards 2013bgfortunePresident Obama unveils cybersecurity push in tech industry’s backyardhttp://fortune.com/2015/02/13/president-obama-cybersecurity/
http://fortune.com/2015/02/13/president-obama-cybersecurity/#commentsFri, 13 Feb 2015 21:08:11 +0000http://fortune.com/?p=989708]]>It may be Friday the 13th, but the White House is hoping a summit on cybersecurity and consumer protection will bring a bit of much-needed luck to the gloomy cyberthreat landscape.

The summit kicked off Friday morning at Stanford University in Palo Alto, Calif. and featured a who's who of leaders from both public and private sectors: the secretaries of Homeland Security and Department of Commerce and the CEOs of Apple, American Express, Kaiser Permanente, AIG and Pacific Gas & Electric, to name a few.

President Barack Obama himself made an appearance, highlighting the need for shared, basic principles in efforts to prevent and combat the increasing number of cyberthreats.

"Government cannot do this alone,” the President told the audience. “The fact is that the private sector can't do this alone either. It's government that often has the latest information on these new threats."

President Obama also used the opportunity to sign a new executive order that encourages U.S. companies to partner both with each other and with government agencies. The order lays out a framework for “expanded information sharing designed to help companies work together, and work with the federal government, to quickly identify and protect against cyber threats.” Already, security vendors like Palo Alto Networks, Fortinet and Symantec have banded together to form the Cyber Threat Alliance to share threat intelligence.

But in order to make bolder moves--like modernizing the way in which companies alert customers of a breach--the President has been pushing Congress to pass a more comprehensive cybersecurity bill.

“This should not be an ideological issue,” President Obama told the audience at Stanford University. “This is not a Democratic or Republican issue. Everybody's online and everybody's vulnerable.”

Indeed, the White House's cybersecurity summit comes on the heels of several high-profile corporate breaches, including at Sony Pictures, Anthem health insurance, Target and Home Depot. Reports of cyberattacks have increased five-fold since 2009, and President Obama has made cybersecurity a priority in 2015 (though his efforts have been criticized on focusing too much on what happens after an attack has taken place). To that end, earlier this week his administration announced a new cybersecurity agency called the Cyber Threat Intelligence Integration Center, which will be tasked with analyzing and quickly sharing intelligence information.

The White House purposely chose to hold the summit in the heart of Silicon Valley, where much of the innovation in next-generation cybersecurity tools is taking place. While the CEOs of Valley heavyweights like Google and Facebook did not show up for the event, Apple CEO Tim Cook AAPL took the stage to make an impassioned plea for privacy and human rights (and to plug the company’s mobile payment system, Apple Pay) and many other notable business leaders across finance, healthcare and other industries also spoke about the need to work together and change regulations in order to better combat cyberattacks.

Despite the gloomy subject, President Obama managed to work the audience and appeal to Silicon Valley–and Stanford University’s–culture of innovation and, well, nerdiness. In addition to giving shout-outs to members of his administration who are Stanford alumni (like U.S. Department of Commerce Secretary Penny Pritzker), he also praised the region’s weather, entrepreneurial spirit and technological prowess.

“This is the place that made ‘nerd’ cool,” President Obama said.

Of course, the summit and the executive order will only go so far in preventing and combating cyberthreats. But one thing is clear: The need to do so is increasingly top of mind, both in Silicon Valley and in Washington D.C.

]]>http://fortune.com/2015/02/13/president-obama-cybersecurity/feed/0Obama speaks at the Summit on Cybersecurity and Consumer Protection in Palo Alto, CaliforniamlevramAmEx shares plunge as Costco dumps its credit cardshttp://fortune.com/2015/02/12/amex-costco-dumps-cards/
http://fortune.com/2015/02/12/amex-costco-dumps-cards/#commentsThu, 12 Feb 2015 20:02:12 +0000http://fortune.com/?p=987767]]>As of next year, Costco Wholesale shoppers will be safe to leave home without their American Express cards.

AmEx AXP shares dropped to their lowest levels since mid-October on Thursday after the credit card company announced that its exclusivity deal with wholesale club retailer Costco is set to expire at the end of March 2016. The market reacted swiftly and sharply to the prospect of Costco no longer accepting AmEx cards. AmEx is currently the only credit card accepted by the retailer, which is one of the largest U.S. retailers with nearly 470 stores across the country.

The credit card company’s shares dropped to around $80 in early trading and were recently trading down by about 6.7%, at $80.88. The steep decline erased roughly $5.9 billion from the payment card giant’s market value, which is still nearly $88 billion.

Costco previously dropped AmEx as its exclusive credit card issuer in Canada and Bloomberg reported last fall that the retailer was considering making the same move in the U.S. The retailer negotiated a deal to partner with Capital One Financial Corp. COF and MasterCard MA in Canada. Shares of Capital One and MasterCard were each up roughly 3% on Thursday.

In a Thursday morning earnings call, AmEx said losing the Costco contract would drag down its earnings and revenue this year and in 2016. The company said it now expects earnings to be flat this year after analysts projected 10% earnings growth, based on polling by Thomson Reuters. AmEx expects earnings growth to return next year.

AmEx and Costco had been engaged in negotiations to extend their agreement in the U.S., but the two sides were unable to reach a deal, AmEx CEO Kenneth Chenault said in a statement. The chief executive added that his company will instead “focus on opportunities in other parts of our business where we see significant potential for growth and attractive returns over the moderate to long term.”

AmEx shares are down 13% on the year and the company announced last month that it plans to cut more than 4,000 jobs this year.

]]>http://fortune.com/2015/02/12/amex-costco-dumps-cards/feed/0CostohuddlestontomMcDonald’s CEO exit erodes diversity among Fortune 500 execshttp://fortune.com/2015/01/29/mcdonalds-ceo-exit-lessens-diversity/
http://fortune.com/2015/01/29/mcdonalds-ceo-exit-lessens-diversity/#commentsThu, 29 Jan 2015 19:32:36 +0000http://fortune.com/?p=966626]]>When McDonald’s Chief Executive Don Thompson retires from his leadership role at the fast-food chain at the beginning of March, only four Fortune 500 companies will be steered by an African American leader.

Thompson’s retirement, which was announced on Wednesday and came less than a week after McDonald’s MCD reported a fifth consecutive quarter of declining same-store sales in the U.S., will hurt CEO diversity among the top Fortune 500 companies. Thomson, an executive with 24 years of experience at McDonald’s, became CEO in 2012 and was replaced by another insider, Steve Easterbrook. Easterbrook is white.

Thompson’s exit has not been viewed as racially motivated in any way as McDonald’s has faced a ton of challenges. For example, 2014 became the first year since 2002 that the fast-food giant suffered a global decline in sales at outlets open for at least a year.

But his retirement will temporarily diminish diversity for the Fortune 500. C-suites are overwhelmingly white, as Fortune has previously reported. J.C. Penney JCP will help improve diversity later this year, when Marvin Ellison, an African American, will become CEO in August. Ellison had worked at Home Depot HD and Target TGT.

Here is a look at the other four Fortune 500 companies that are led by an African American. All but one were insiders that worked their way up the ranks to eventually claim the top leadership role.

Kenneth Frazier -- Merck (ranked 65)

Photograph by Matt Rourke -- AP

Kenneth Frazier, chairman and CEO of Merck [fortune-stock symbol="MRK"], first joined the pharmaceutical company in 1992 as an executive and worked his way up the ranks with a number of promotions within the legal department. He eventually became Merck president in 2010 and became CEO less than a year later. Prior to joining Merck, Frazier was a partner at a Philadelphia law firm. Frazier received a bachelor's degree from Pennsylvania State University and holds a J.D. from Harvard Law School.

Kenneth Chenault -- American Express (90)

Photograph by Jessica Rinaldi -- Reuters

Financial services firm American Express [fortune-stock symbol="AXP"] has been led by Chairman and CEO Kenneth Chenault since April 2001. He joined the company in 1981 and was named president of the U.S. division of American Express Travel Related Services in 1993. He also previously served as chief operating officer. Chenault serves as a board member at two of the U.S.'s largest firms, International Business Machines Corp. [fortune-stock symbol="IBM"] and Procter & Gamble [fortune-stock symbol="PG"].

Roger W. Ferguson Jr. -- TIAA-CREF (95)

Photograph by Peter Foley -- Bloomberg via Getty Images

Roger W. Ferguson Jr., who joined financial services provider TIAA-CREF in 2008, previously served as former vice chairman at the Federal Reserve. He was the only Fed governor in Washington D.C. when 9/11 occurred, and thus he led the Fed's initial response to the terrorist attacks and helped keep the U.S. financial system functioning. He also served as an executive at reinsurance company Swiss Re. Ferguson began his career as an attorney in New York City.

Ursula Burns -- Xerox (137)

Photograph by Eduardo Munoz -- Reuters

Xerox has been led by Ursula Burns since July 2009, and shortly after, made the largest acquisition in history with the $6.4 billion purchase of Affiliated Computer Services. Burns, like most of the CEOs on this list, was an insider at Xerox as she had worked at the company since 1980 when she first served as a mechanical engineering summer intern. Burns worked her way up the ranks and also helped Xerox restructure its operations under the direction of then-CEO Anne Mulcahy. Burns serves on the boards of American Express and Exxon Mobil [fortune-stock symbol="XOM"].

]]>http://fortune.com/2015/01/29/mcdonalds-ceo-exit-lessens-diversity/feed/0McDonalds CEO Donald ThompsonjohnnerkellAmerican Express plans to start operations in Cubahttp://fortune.com/2015/01/27/american-express-plans-to-start-operations-in-cuba/
http://fortune.com/2015/01/27/american-express-plans-to-start-operations-in-cuba/#commentsTue, 27 Jan 2015 22:14:31 +0000http://fortune.com/?p=964071]]>(Reuters) – American Express AXP said it would launch operations in Cuba following President Barack Obama’s decision this month to ease sanctions against the communist-ruled island.

MasterCard MAsaid last week it would allow its cards issued in the United States to be used in Cuba from March 1 as Washington eases restrictions on travel, trade and financial activities.

Marina Norville, a spokeswoman for American Express, confirmed in an email that AmEx also planned to start business activities in Cuba but provided no further details.

Visa V has not revealed its plans for Cuba, and company executives were not available to comment on Tuesday.

]]>http://fortune.com/2015/01/27/american-express-plans-to-start-operations-in-cuba/feed/0JetBlue New York Havana flightsvernekopyAmerican Express to cut 4,000 jobshttp://fortune.com/2015/01/21/american-express-job-cuts/
http://fortune.com/2015/01/21/american-express-job-cuts/#commentsWed, 21 Jan 2015 22:33:30 +0000http://fortune.com/?p=955222]]>American Express expects to cut 4,000 jobs in the coming months, according to CNBC, citing a company representative.

The reductions would represent around 7% of the credit card firm’s workforce of 63,000.

In the earnings release, CEO Kenneth Chenault said that his company had “tight control of operating expenses.” The company will take a $313 million pretax charge in the fourth quarter for the restructuring.

In 2013, American Express said it would cut 5,400 jobs, which the Wall Street Journal called its most cut jobs in a decade.

]]>http://fortune.com/2015/01/21/american-express-job-cuts/feed/0Blue Ribbon — American ExpresssnyderfortuneWhy Apple Pay took so long to get herehttp://fortune.com/2014/09/10/why-apple-pay-took-so-long-to-get-here/
http://fortune.com/2014/09/10/why-apple-pay-took-so-long-to-get-here/#commentsWed, 10 Sep 2014 18:47:53 +0000http://fortune.com/?p=784610]]>Among the debut of new iPhone models and the reveal of its long-awaited Watch, Apple AAPLon Tuesday announced a new mobile payments system, named simply Apple Pay, that promises to accomplish what preceding systems from Google, Square, and others have not: gain traction with regular people.

The system is expected to go live in October with support from Visa, MasterCard, American Express, Bank of America, Capital One, Chase, Citi, and Wells Fargo. Barclays, Navy Federal, PNC, USAA, and USBank are expected to follow.

Despite quite a bit of hype and investment in mobile payments, no one seems to be able to kill the plastic debit or credit card. What makes this time different? Fortune spoke with Edward McLaughlin, chief emerging payments officer at MasterCard.

F: You and I have previously spoken at length about the difficulty of consumer adoption of mobile payments. What makes this time different?

EM: For a consumer product like this to really break through, there are three things that have to be there. First, there's underlying capability. Apple's using MasterCard contactless--it's faster, more convenient. With our digital enablement service, or MDES, it's more secure because we're not using the base card number and instead putting a token on the phone. We have all the right enabling technology this time.

Secondly, it's the consumer experience. That's where it's been awesome working with Apple. We handle all the approvals and authorization. They focus on the experience. It’s incredibly easy to start using. It's great--seamless, very elegant.

The third element, which is the most critical, is availability and participation. That's what we worked so hard on with the banks. On day one, over 80% of the debit and credit cards in the U.S. will be ready to go. The cards and accounts you already have just work.

Why hasn't this worked before? Why now?

What's most different is the fact that over 80% of cards are fully enabled for the service from the moment it's available. Before, it was relatively limited.

Also, this iPhone 6 is the first time Apple has built into its hardware the necessary elements to support it. There's a special chip, referred to as a secure element, that's embedded into the device. It's where biometrics are stored and where the secure token is stored. And also the NFC--the [near-field communications] antenna is there. They have literally changed their platform for this. We've done contactless for awhile, but it's the first time Apple has put this in their device.

Tell me more about this secure element and its role.

It's the same reason we put a chip onto plastic cards, to secure them. It holds in an impenetrable way that unique number or token that you use to make payments. It also holds a key that will be used around the cryptology around the transaction. Every transaction is unique--if it's captured, it can't be replayed. You can't clone it or use it to make another card. You can't use it out of context. It's what we do with secure chip cards, and what we do now with the iPhone 6.

Why does the secure element need to be physically separate? Why not just put that information on one of the iPhone’s existing chips?

The isolation and walling off helps with security. Before, we wouldn't have stored that information on the handset without an appropriate container for it.

OK. You mentioned participation. Why is it hard to wrangle banks? Mobile payments seem like a win-win with little downside--another option, essentially.

Anytime you have lots of people making independent investment decisions, it's helpful to have an environment and event like what Apple's doing with Apple Pay to bring it to life. The banks were quite enthusiastic.

The one piece that's new is the ability to put the secure payment token into the handset. There are industry standards published around that to work in a consistent way. Which means the banks need to test their systems [to accept payment with the new method]. It's systems integration work.

You said the MDES was a key part of making this happen. When did it come out?

The first bulletins we sent to our network about it were in April of 2013. In October 2013, the three of us--MasterCard, Visa, Amex--put a proposal for standards out there. The standards for NFC have been around there awhile, probably a decade. As for the tokenization, we sent out the initial bulletin on that in April, proposed the standard in October and tested over the summer to go live in September.

In other words, a lot of the supporting elements to yesterday’s announcement are still fairly new. Got it. How does MasterCard project usage moving forward? I realize it’s brand new, but perhaps you saw interesting uses in testing.

It's going to be really exciting. First, it makes the MasterCard account today that much more useful and valuable for you. Secondly, it lets us to take advantage of the system in our ongoing effort to push all fraud out of the system. We do think we can have a positive impact on fraud. Finally, we live in a world where 85% of transactions are still in cash. Electronic transactions are fundamentally better--efficient, less costly. We expect an increase in volume of transactions.

We see, going forward, that consumers’ lives are moving to connected devices. We think every device you have will eventually become a commerce device. What you're seeing here is an infrastructure that enables any connected device to be easily secured for commerce.

]]>http://fortune.com/2014/09/10/why-apple-pay-took-so-long-to-get-here/feed/0soccerrogueUber and the future of American Expresshttp://fortune.com/2014/06/09/uber-and-the-future-of-american-express/
http://fortune.com/2014/06/09/uber-and-the-future-of-american-express/#commentsMon, 09 Jun 2014 19:00:57 +0000http://fortune.com/?p=634756]]>Apps like Uber pose a huge threat to credit card companies like American Express AXP. Once a consumer downloads the app and enters her card number, she pays for her ride simply by tapping a button on Uber. She doesn't have to think about the American Express brand again to complete future transactions. Though the transportation logistics startup is just five years old, American Express cardholders spent “hundreds of millions of dollars” on Uber last year, according to American Express president Ed Gilligan.

That's why a new partnership the companies have struck is so important to American Express. Announced June 9, the tech integration will allow American Express rewards program members in the United States to double their points when they pay for a ride on Uber--or pay for their rides using points.

Here’s how it works: If a card is eligible, Uber will prompt the cardmember to enroll in the program when she launches the updated app. Once enrolled, she will have a new in-app option to choose "Earn 2x Points" or "Use Points." She’ll then receive an on-screen ride summary and email receipt from Uber noting the choice.

As part of the launch, Uber will also roll out a program, funded by American Express, to reward drivers. Called the Sixth Star Award, this $1,000 prize will be given to one of Uber’s most highly rated drivers each week.

For Uber, the upside to this partnership is clear. “It goes without saying American Express has a huge membership base and will help us grow our customers,” CEO Travis Kalanick told Fortune. “And I won’t be happy until all of our customers are using American Express.”

That’s where the value comes in for AmEx, which is leaning on its membership rewards program to build its brand with consumers as they stop removing the plastic card from their wallets as frequently. In October, the company began letting New York taxi cab riders pay their fares with points, thanks to a deal with Verifone PAY, the hardware provider that supplies the payments mechanism in cabs. A similar deal with Amazon AMZN allows members to shop with points.

American Express has also participated in other digital payments efforts, but overall, these web wallets have not really caught on yet. In 2011, several tech companies including Google GOOG and Square launched digital wallets. At the time, AmEx partnered with other credit card companies as well as the three biggest cellphone carriers in the United States to create Isis Mobile Wallet, but it has been slow to take off because the technology required to enable it--the NFC (near-field communication) chip that lets customers tap their smartphone to pay with it--is not built into many smartphones, including Apple’s iPhone. Isis reports that user adoption has finally picked up, but Square recently announced it would shutter its efforts and Google has said customers have been slow to embrace its wallet product.

Partly, this is because credit cards are easy. Why invest the time in moving your wallet to your smartphone when the plastic in your purse is nearly effortless to use and has historical precedence?

Uber, however, is even easier. And it’s not the only app that asks users to store their payment information and makes purchases. From tech startups like food delivery app Seamless GRUB to behemoths like Amazon, companies are making payment easy--and void of credit card branding. That’s why American Express must offer something more to its customers to keep them--and find new avenues like this partnership with Uber to market to them.

]]>http://fortune.com/2014/06/09/uber-and-the-future-of-american-express/feed/0uber-phone-duo-2Jessi Hempel, writerAmerican Express CEO Ken Chenault: ‘There’s a $25 trillion opportunity’http://fortune.com/2014/05/21/american-express-ceo-ken-chenault-theres-a-25-trillion-opportunity/
http://fortune.com/2014/05/21/american-express-ceo-ken-chenault-theres-a-25-trillion-opportunity/#commentsWed, 21 May 2014 14:18:04 +0000http://beta.fortune.com/?p=386876]]>FORTUNE — We are paying for things in new ways; that much is clear. We’re paying for taxi rides using our Uber app, checking out personally tailored offers on Facebook, and downloading films to our Amazon Kindles — without ever pulling the plastic out of our wallets. Yet Ken Chenault plans to insure that American Express AXP remains in the center of every transaction.

At the Mobile-First Summit in New York, I sat down with the chief executive to discuss the future of mobile payments. Below is a condensed version of our conversation, edited for clarity.

Fortune: What is the scope of the mobile opportunity for American Express?

Chenault: Mobile is redefining both online and offline commerce. The penetration of m-commerce in e-commerce was around 0.09% [Meaning that less than one percent of e-commerce transactions happened on mobile devices –Ed.]. By 2017, it's projected to be at 26% and that's just penetration in e-commerce.

That's just e-commerce. When will we stop breaking it out and talk simply about commerce?

What's happening is a gigantic opportunity. Mobile will redefine how commerce is done. Steve Jobs redefined the retail experience. I think commerce and mobile will do an even more transformational job in an exponential way. The opportunity for startups to redefine the power of mobile is incredible. Scale is important, but if you have the idea, you now have the ability to connect with companies that can drive that scale. Clearly there are five platforms that will play an important role and be very powerful: Amazon AAZN, Apple AAPL, Google GOOG, Facebook FB, and Alibaba. More and more, startups will be able to connect to these services to scale quickly.

How does the competitive landscape change?

I think it's important to understand the payments industry and commerce is going through fundamental change. You are seeing a blurring of commerce, mobile, payments, and a convergence of online and offline. In the near term, plastic is not going to go away. You are going to see a demarcation between payment companies. There are going to be those that stay in the status quo, and they're going to focus on facilitating payments. That is a mistake. They will be reduced to a commodity. There will be those companies who will focus on the entire commerce journey, and that’s us.

I'll give you one example of how payments has changed: Uber has changed payments. Infrastructure hasn't changed at all, but the experience is frictionless and seamless, and you don't even know you’re consummating a payment.

We have the largest integrated global payments platform. We bring together users, card members, and merchants, and the data is incredibly valuable. We know where they spend online and offline. We want to deliver benefits and services when our card members want it, where, and how they want it.

Let's talk about Uber. I use it, and just noticed this morning that when I pulled up Google Maps to get directions to this venue, the app offered me the option to call Uber. As a consumer, I was dealing with the Google brand and the Uber brand. Yes, I made the payment on my American Express card, which is linked to my Uber account, but the AmEx brand didn't come into my line of sight. Is that a good or a bad thing for AmEx?

For us it's a good thing because at the end of the day we have a well-known and trusted brand … here's not much of a difference between saying I want to be the first card in the wallet and saying I want to have AmEx as my default option. What is critical is the benefits, services, and innovation we provide so we're the first card in the wallet.

So you're talking about the difference between the transaction and what you call “the journey.” What's involved in that journey?

Here's what's key. If we look at how mobile devices are used, people who use mobile devices in the shoppers' journey are 40% more likely to convert to sales. Think about how people use information, how they leverage recommendations they get from social media sites. The key is to understand the different elements of the commerce journey. We want to be where our customers are. We want to deliver them benefits in the way they want to have those benefits presented to them. It goes back to a key message I give in my organization: This is an environment where you innovate or die. We want to be the company that will put us out of business.

Part of that is looking beyond the trends to understand systematic change. Were digital wallets a fad? In 2011, companies like Google and Square launched them. In 2014, many of those efforts haven’t worked and are being retried. Are digital wallets dead?

I don't think they're dead, but if you go back to what I said publicly in 2011, I didn't think these wallets met a value proposition. I'm going to tap to pay? What's the friction that it's really solving? What are the benefits that I'm getting? How is that helping me in my shopping journey? At the end of the day, the failure of wallets was not being focused enough on customer needs.

But you think some efforts have worked?

We acquired a platform called Revolution Money in 2009 at the height of the financial crisis. It is a very flexible alternative payments platform. We said, There's a large population of folks not being served — there are 70 million people in this country who don't have a checking account or don't believe they're being served well. NerdWallet has said with prepaid cards, you're paying $300 a year to use your own money. With checking accounts, people are paying several hundred dollars a year if they don't have a minimum balance. So we came out with an online payment platform that works offline and online. In early 2014, once we got the platform stabilized, we brought on 2.4 million customers. In the month of April alone, we brought on 1 million customers. They're transacting volumes on our platform. Wallets, if they are done right, can work. Mobile apps will play an important role going forward.

We made further changes to the functionality of the platform so you can do anything you want — pay bills, do peer-to-peer-payments, write checks. The term we coined in our company is that it is expensive to be poor. But we can develop a model where we have attractive economics, so instead of paying $14.95 a month for a prepaid card, you pay $1 a month with us for a far better service.

Peer-to-peer payments: How important is the capability?

It's very important, but what's critical is that you have got to connect peer-to-peer payments with a range of services that meet a variety of needs. As a standalone, it’s difficult to generate the economics you need. But there's a very high demand. We looked at where spending takes place. Outside of credit cards and charge cards, there's $25 trillion out there. That's a tremendous opportunity.

You’ve done creative things with the AmEx loyalty program like recently making it possible for people to pay for a New York City cab ride with points. Are people actually using this service?

Yes! It is frictionless, and once people use it, 80% of the them return.

(Audience member: “I'm worried it's a bad deal, that the points can be used better elsewhere.”)

Here's what you're missing. Do you want to only use those points for airlines? People have said, “I want choice and convenience.” If you just say for every dollar there's one point, people want a wide variety of choices.

]]>http://fortune.com/2014/05/21/american-express-ceo-ken-chenault-theres-a-25-trillion-opportunity/feed/0140520165824-american-express-ceo-kenneth-chenault-economic-club-washington-620xaburcunoyan90Why Warren Buffett’s betting big on American Expresshttp://fortune.com/2012/11/21/why-warren-buffetts-betting-big-on-american-express/
http://fortune.com/2012/11/21/why-warren-buffetts-betting-big-on-american-express/#commentsWed, 21 Nov 2012 16:30:50 +0000http://test-alley.fortune.com/2012/11/21/why-warren-buffetts-betting-big-on-american-express/]]>This story is from the October 30, 1995 issue of Fortune. It is the full text of an article excerpted in Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012, a Fortune Magazine book, collected and expanded by Carol Loomis. Amex CEO Harvey Golub sees a bright future for the Amex brand: Nestled in his elegant quarters overlooking New York harbor, the CEO plot his company’s comeback. He can view Ellis Island, where his father landed in 1907.

FORTUNE — Warren Buffett loves to tell a parable about the stock market’s irrationality. It was 1963, and a scandal involving fake inventories of salad oil at a small subsidiary of American Express drove down the price of Amex shares. How bad a problem was this? To find out, Buffett spent an evening with the cashier at Ross’s Steak House in Omaha seeing if people would stop using their green cards. The scandal didn’t seem to give any of the diners indigestion, so Buffett seized the opportunity to buy 5% of the company for $13 million. He later sold his holding for a $20 million profit.

Now Buffett hopes to relive the story — with much larger numbers. Over the past few years the CEO of Berkshire Hathaway brk.a has accumulated more than 49 million shares of American Express AXP, a 10.1% stake. Its value, about $2.2 billion, makes it one of Buffett’s largest investments, along with Coca-Cola KO, Gillette, and Capital Cities/ABC. Once again he thinks Wall Street is irrationally down on Amex stock. The trouble this time is not salad oil but a long and well-publicized catalogue of strife: A nearly dysfunctional management team led by James Robinson III damaged the brand in the early 1990s; his grand strategy to build a financial supermarket fell like a house of cards, with Amex’s Shearson Lehman brokerage subsidiary eating up $4 billion in capital before being sold last year. More recently the tarnished American Express card has been losing market share to Visa V and MasterCard MA as Amex’s principal consumer benefit — prestige — becomes a tougher sell. And the company’s international business, say analysts, is in the doldrums.

Always the patient investor, Buffett — worth $14.2 billion at last count — believes the latest troubles are little more than a distraction. What he likes is exactly what has made him rich before: a mighty brand coupled with a healthy cash flow. After all, American Express, according to London marketing group Interbrand, is still one of the ten most-recognized brands in the world. Buffett believes the name remains “synonymous with financial integrity and money substitutes around the world.” As he explained to Berkshire Hathaway shareholders at last spring’s annual meeting: “By far the most important factor in [Amex’s] future for a great many years to come will be the credit card. We think American Express’s management thinks well about … how to keep the card special.” Buffett probably isn’t particularly concerned about the company’s loss of market share. More likely, he’s gambling that Amex, even if it fails to grow dramatically, will become a very profitable niche player in the card market.

But if American Express is to fulfill Buffett’s expectations, it will have to breathe new life into its brand — no easy task. The big question is whether Harvey Golub, who became CEO in 1993 after the board booted Robinson, is up to the job. He came to Amex from McKinsey & Co. and has done a sterling job doing what consultants do — cutting costs and shedding money-losing divisions like Shearson Lehman. He imposed discipline on Amex’s free-spending ways by cutting a draconian $1.6 billion out of gross operating costs. Amex, with 1994 revenues of $15.6 billion (No. 55 on the Fortune 500), saw operating profits grow 18% last year. Since Buffett started heavily buying the stock over the past year, it has risen — thanks mostly to the cost cutting — from $25 a share to a recent $44. (For more on Buffett's investing style, see "How Buffett Rated Amex a Buy," p. 129, Tap Dancing to Work.)

“American Express has the best and most loaded-up battleships,” says Salomon Brothers analyst Thomas Facciola: “Now it’s a question of whether the company can hit its targets.” The answer is not at all clear. In the highly competitive credit card market, which includes Visa and MasterCard, American Express is launching salvos of new cards like Optima True Grace as well as ones aimed at students. But so far critics find Amex’s new credit cards ho-hum, modest successes that seem too little too late. The company, they say, needs to wow the market with a sizzling hit like AT&T’s Universal card or GM’s GM 5% rebate card. Argues H. Eugene Lockhart, MasterCard CEO and one of Golub’s biggest rivals: “Will Golub ever achieve the growth rates that we and Visa are achieving now? I really doubt it because of the basic core proposition. We offer better value to the customer than they do.”

Seated behind a gleaming cherry-wood conference table on the 51st floor of his company’s baronial headquarters in Manhattan’s World Financial Center, Golub puffs on a Benson & Hedges cigarette and sips coffee from a mug promoting his company’s PARTNERSHIPS WITH SUPERMARKETS. This day he comes off as a taciturn man, given to monosyllabic answers and long pauses. During this interview with Fortune he displayed no excitement about his campaign to resuscitate Amex.

Golub is a classic McKinsey consultant, a brilliant analyst who, as he has proved, knows how to restructure a broken business. But that doesn’t mean he knows how to inspire, revitalize, and grow one profitably. At IBM IBM, CEO Louis Gerstner, also a McKinsey alumnus (and former Amex president), has done a skilled job cutting costs but now faces a similar dilemma in making Big Blue grow. At Westinghouse, yet another McKinseyite, Michael Jordan, has so far failed to get a troubled company rolling.

And that could be a problem. Golub needs to transform a slow-moving, arrogant American Express culture into one that more closely resembles those of its competitors: gung-ho, innovative, and fast moving. Over the years, Amex acquired a reputation for being a bear to work with. You may recall the Boston Fee Party, when one restaurateur, upset about the high fees Amex was charging, stuck a chef’s knife through an Amex green card, an event that made national TV. In another instance, AT&T T, American Airlines, and others approached the company with offers to issue joint cards with nifty perks for customers, but Amex management haughtily turned them down. Says Golub: “We should have seen what was happening, but we let success blind us. We were inflexible. We were arrogant. We were dreaming.”

Yet Golub can’t readily explain his antidote. When asked whether arrogance is still a problem at Amex, the portly 56-year-old with blue eyes blazing behind wire-rim glasses responded as follows: “You want to have an organization that is humble and proud, that is confident but not arrogant, is confident but not self-delusional. So it’s a fine line, and I’m sure that to some people what may be viewed as confidence comes across as arrogance. To others it comes across as humility. If we had everybody saying we’re not arrogant, my guess is we would be servile.”

Even if his strategy is on target, little in Golub’s past suggests he has the charisma to rally the troops. In 1967 he joined McKinsey, where he stayed for 14 years, save for a three-year stint running a New Jersey trucking firm. His attempt to grow that company never got off the ground. Golub left, he says, over a strategy disagreement. The business later went bust.

Golub’s entree to Amex was through his work at McKinsey, which included advising Amex’s Travel Related Services business. He championed quality programs like replacing lost cards within 24 hours. In 1984 he took a job at IDS, American Express’s personal finance division, where he gets much credit for improving the sales force and customer service.

But even Golub’s fans wonder whether he has the right stuff to take on as big a challenge as Amex. Colleagues admire his blunt, direct style, feeling he’s not afraid to face the truth, no matter how bad — a rare quality in a CEO. At the same time, he is not seen as what anyone would call a forceful leader. Says a former Amex manager who wished not to be named: “Harvey is regarded as very tough. I’ve never heard anyone say that they like him. Never heard anyone say they would lay down their life for him. No one at Amex waxes about what a great guy he is. He’s basically ‘In Your Face Harvey,’ just like those awful pictures of him where he’s always leaning forward in his suspenders looking like he’s about to bite your face off.”

Inside the company, Golub is both feared and respected. Basically, he has three different styles:

The Brooder. In the first he becomes silent and angry looking, and doesn’t say anything. He just conveys unhappiness.

The Attacker. In the second he gets angry. Says a former top executive who has left the company: “I was in a budget review with him where he attacked people at the most basic level. He yelled at them, ‘Why the hell should we pay all this money when nothing happens? All you do is cause problems, you aren’t even trying, this is the first area I should cut.’ ”

The Consultant. His third is the highly analytical consultant who cross-examines people. It’s an acceptable style that can work, but only when accompanied with reinforcing actions like recognizing people and thanking them. Says the ex-employee: “I have no knowledge of his ever doing that.”

Vice chairman Kenneth Chenault, on the other hand, is well liked and trusted by employees. Before coming to Amex, he worked for two years as a consultant at Bain & Co. His sunny personality and marketer’s savvy are welcome contrasts to Golub’s gloomy persona. But when Golub’s friend George “Chuck” Farr left McKinsey last May to join the CEO’s office as another vice chairman, employees wondered why. They questioned whether another consultant was what Amex needed.

No matter what kind of leader Golub turns out to be, most everyone in the industry agrees that his strategy to revive the brand basically makes sense. Says one consultant: “What I’ve picked up working there is that compared with the old regime, people now have a clear sense of where they are going.”

Golub is convinced that Amex can clamber back to its former preeminence by adhering to a starkly simple statement of strategy: “To become the world’s most respected service brand.” Whether that turns out to be a rallying cry or just hubris, it has so far provided Golub & Co. with a road map for revival. Says Farr: “The brand is the engine that will drive the business. If we can’t use the brand, we won’t be in the business.” Clearly words that would comfort Buffett.

Chenault leads the drive to beef up credit cards: If he plays his hand right, Amex’s affable vice chairman will expand the brand into many new niche markets around the world.

If the brand is the strategy, the heart of the brand remains the American Express card. Amex today consists of two main parts: Travel Related Services, including cards, traveler’s checks, and a travel agency business, which last year contributed 72% of revenues and 65% of pretax earnings, and American Express Financial Advisors (formerly IDS), which sells mutual funds and other financial products and accounted for 23% of revenues and 29% of earnings.

The good news for Golub is that the card market is booming. Credit cards — think of them as a pawnshop for yuppies — have been a hugely profitable business. Last year Americans tallied up $611 billion in card charges; that’s $2,336 for every man, woman, and child, and 23% more than the year before. This $611 billion represents only 10% of total consumer spending, so the industry still has room to grow.

But American Express has mostly missed out on the best part, the business of financing credit card loans. Its most obvious difference from such competitors as Visa and MasterCard is that you must pay the entire balance each month. The competition’s business is astonishingly lucrative because of an equally astonishing spread; issuers today borrow at about 7%, then lend those funds to cardholders at around 17%. Various bells and whistles like below-market teaser rates, insurance, frequent-flier miles, and cash rebates eat into some of that lucre. Issuers must also invest substantial sums in technology to keep track of all that business.

Why are consumers willing to pay an ungodly 17% to borrow money for things like White Sox tickets and a night out at a Sizzler? This anomaly so mystifies University of Maryland economist Lawrence Ausubel that he recently presented a paper on the subject to the National Bureau of Economic Research. His conclusion: Issuers can get away with charging such steep interest rates because consumers underestimate the amount they’ll borrow. And once cardholders do borrow, rose-colored glasses of denial prevent them from acknowledging how much debt they’ve assumed. In a 1992 study, Ausubel reports, borrowers claimed to owe cumulatively $70 billion in debt when in truth they owed $156 billion.

The bizarre consumer behavior doesn’t stop there. Some people, not wanting to hassle with the paperwork, don’t bother to trade in their high-interest credit card for one with a lower rate. Others just don’t think about the financial ramifications. A woman in Westchester County, New York, chalked up $4,000 on her Visa last month. Though she could afford to pay off the whole thing, she cut a check for only $1,000. As she explains, “I wanted to keep a high balance so I wouldn’t be tempted to run up my card again.” Understand? In any case, lucky Visa collects a handsome 17% annual interest on her balance.

This has been one great party that Amex came late to — and now the party looks to be ending. Michael Auriemma, a credit card consultant at a Westbury, New York, firm that bears his name, thinks commoditization in the card business is only a matter of time, irrational cardholders notwithstanding. The industry is shifting to a buyer’s market as the 5,000 financial institutions that issue Visas, MasterCards, and others scramble to grab customers by eliminating annual fees and offering attractive initial interest rates. In the U.S. an incomprehensible 2.4 billion preapproved credit card solicitations were mailed last year, enough for every family to receive two a month.

The landscape is becoming so treacherous that among the fastest-growing issuers today are four barely known low-cost Visa/ MasterCard credit card companies: Advanta, Capital One, First USA, and MBNA (For more, click here).

Commoditization is bad news for Amex because the American Express card has always been marketed as a high-fee, high-prestige item — $55 a year for a green card, $300 for a top-end platinum. Although its corporate card business remains strong, many individuals are beginning to doubt whether this privilege still merits a premium. Amex’s share of the U.S. card market, measured by dollar volume, has dropped from nearly 25% in 1990 to 16% this year, behind Visa (49%) and MasterCard (27%). Explains MasterCard’s Lockhart: “The consumer today simply doesn’t see the need to pay fees for a card that gives them no greater functionality than anything we or Visa would give them.”

Golub’s challenge, then, is one of the trickiest in management — to make his brand all things to all people. “The company thinks of its brand as homogeneous,” says Thomas O. Jones, a former Amex executive: “But it’s not. It is one brand internationally for the business traveler, one for the general public that remembers Karl Malden and ‘Don’t leave home without it,’ and one for the merchants who accept it. It is a huge asset that needs to be watered properly, but I think the company could be doing a much better job.”

American Express targets college campuses: An American University student in Washington, D.C., uses a new card that electronically stores a value of $100. With it he can buy books or burgers.

Priority No. 1 is hanging on to its high-profit, high-rolling customers. Amex cardholders charge on average $4,000 a year, vs. $1,500 for Visa and MasterCard, and Golub wants to offer them more value through special services. American Express Platinum Card members, for instance, now can get calls reminding them to buy a present for their mother’s birthday — which they can, by the way, charge. He also wants to capitalize on the company’s vast database of information about customer purchases and retailers’ sales. The company’s goal is to glean from these records individual tastes such as, say, a customer’s predilection for Italian food. Armed with the knowledge, Amex might run a promotion that offers the cardholder a free bottle of wine at a new Italian restaurant opening in his neighborhood. Such customized rewards won’t be widely available until next year.

When it comes to polishing the card’s carriage trade image, Golub also needs to work on what marketers call “the experience.” This is the strategy that has helped companies like Disney DIS and McDonald’s MCD flourish. Disneyland, for example, is more than a theme park. It provides a certain type of enjoyable and predictable experience for its little Mouseketeers. Similarly, McDonald’s is not just any fast-food restaurant. Diners know what to expect under the golden arches. Ask a McDonald’s executive what the company provides, and he’ll give you the official answer: “a consistent, family-oriented, convenient hamburger experience.” Or as a Coke KO exec would say: “a simple moment of refreshment.”

In American Express’s world, the card is supposed to offer a sense of financial security and cachet — an announcement that when you use this card, you’ve made it in the world. For years that’s what has made American Express cards and traveler’s checks successful — both products projected the comforting image of Amex taking care of its members whether at home or traveling abroad. Studies show that some 70% of cardholders feel that emotion is as important as price when choosing a card. Some people believe that whipping out an American Express card will impress a client — will announce they’ve arrived.

To his credit, Golub is working hard to improve the Amex experience by making sure members aren’t treated like lepers when they pull out their platinum cards. By lowering merchants’ fees and making payments to restaurants and stores more promptly, Golub has multiplied the number of places that accept his cards. In addition to the usual four-star restaurants and resorts, consumers can now use American Express cards to buy plebeian items such as stamps at the post office, eggs at ShopRite, socks at Kmart, a cup of coffee at Starbucks, and a movie at Blockbuster. But the company still has a long way to go to build up the Amex experience overseas, especially in Europe, where the card is not nearly as widely accepted for shopping as Visa and MasterCard.

Just rebuilding the traditional Amex aura will be tough enough, but Golub must do it while moving downscale to find more cardholders. Observes David Aaker, a U.C. Berkeley marketing professor and author of the soon-to-be-published book Building Strong Brands: “When you move down-market you run the risk of losing what you had, and then you don’t have anything.” Adds Atlanta credit card consultant Bruce Brittain: “Can you maintain an upscale image while you go after a downscale market?”

Amex plans to capture the downscale market by going mano a mano against Visa and MasterCard with its Optima card. As with Visa and MasterCard, you must pay your Optima balance each month or pay interest. Optima is what is known in marketing circles as a subbrand, which means it capitalizes on the brand name but has a distinct identity of its own. That’s why the Optima card is blue, not green, and has a different name, though American Express is printed prominently on the card. Says Aaker: “You use a subbrand to represent the mass market, while still keeping your prestige brand. The problem is not losing the overall distinction of the brand.” It could happen. If the green-, gold-, and platinum-card members sense the brand is being debased with Optima, they’ll flee. Conversely, a brand with a history of snob appeal isn’t necessarily an easy sell to the masses in an increasingly egalitarian age.

Amex knows it is plunging into a competitive inferno and is working hard to boost its appeal with new services. Last year, for example, Amex successfully introduced a variation on Optima called Optima True Grace. This card starts running the interest meter only after a grace period of 25 days has passed from the date of a purchase. True Grace was snatched up by an estimated 1.4 million users, about twice as many as the company says it predicted, in part because of an effective $40 million ad campaign featuring that purveyor of Waspy lifestyles, magazine publisher-cover model Martha Stewart. This summer Amex sewed up an important deal by winning the right to issue a new Optima credit card jointly with Delta Air Lines DAL, the last big airline without its own card. The launch of Delta SkyMiles Optima is a coup for Amex, says Card News editor Lurdes Abruscato, because at least 13 other competitors, including Chemical Bank and Wachovia, lobbied hard for it.

Today, Amex is testing all manner of combinations — cards with rebates, low rates, no fees, and a card targeted at students. Among them is a so-called stored-value card, a handy plastic substitute for quarters and dollar bills in various denominations, say, $25, $50, and $100. Armed with this plastic, college students can call home, buy meals at their cafeteria, or purchase books, and New Yorkers can pay for washing clothes in apartment laundry facilities. It’s a great niche for Amex since the company plans to invest the float, i.e., funds paid for the card but not yet spent. Traveler’s checks are such a stored-value product, and currently Amex carries a hefty $6.7 billion of these free funds on its balance sheet.

Is Golub up to bringing all this together? He thinks so. As he made clear in a recent talk to students at New York University’s Stern School: “To succeed, I believe an organization has to change and adjust before it is forced to do so by external forces. It must reinvent itself and become the very company that could put it out of business before somebody else does.”

No matter how tough the challenges that lie ahead for Amex, it’s rarely wise to bet against Warren Buffett. After all, he has wagered on strong brands like Coke and Gillette and made a bundle. He also invested successfully in auto insurer Geico, which, like Amex, has a strong cash flow. When Buffett comes up aces, it’s usually because he’s backing a strong management hand. What’s hard to see this time around is how a bunch of consultants can rake in the pot in a truly cutthroat game.